Fact:CalPERS follows accounting standards set by the Governmental Accounting Standards Board. We have received awards over the last 15 years for meeting these standards through our comprehensive annual financial report.
Current industry accounting rules received support recently in testimony before the Government Finance Officers Association by 27 state treasurers, the National Conference of State Legislators, the National Association of Counties, the National League of Cities, the U.S. Conference of Mayors, the National Association of State Auditors, Comptrollers and Treasurers, and AARP. These experts have gone on record with GASB stating that, by and large, existing accounting standards are appropriate for public pension funds.
Rate smoothing is a method for reducing the volatility of employer rates year to year. It stabilizes rates for employers by allowing extraordinary investment gains to be used in future years to soften rate increases. It produces rates compliant with Governmental Accounting Standards and provides for more stable employer contributions. Rate smoothing allowed CalPERS to hold back 14 percent of its assets prior to 2008 for the downturn that began in 2009. This was used to offset losses for 2008-09.
The special rate smoothing policy designed to make up for the unique loss of 23.4 percent doesn’t kick the can down the road and require future generations to pay for today’s workers pensions. Our smoothing policy, in fact, does the opposite because it will be paid over a fixed 30-year period, not a rolling 30-year period.
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